Kellogg Company announced that its board of directors has approved a plan to separate its North American cereal and plant-based foods businesses, via tax-free spin-offs, resulting in three independent public companies, each better positioned to unlock full standalone potential. The three companies, whose names will be determined later, would be the following:
"Global Snacking Co.", with about $11.4 billion* in net sales, will be a leading company in global snacking, international cereal and noodles, and North America frozen breakfast, with iconic, world-class brands and strong underlying growth momentum and profitability;
"North America Cereal Co.", with about $2.4 billion* in net sales, will be a leading cereal company in the US, Canada, and Caribbean, with a portfolio of iconic, world-class brands and compelling opportunities for investment and profit growth; and
"Plant Co.", with about $340 million* in net sales, will be a leading, profitable, pure-play plant-based foods company, anchored by the MorningStar Farms brand, with a significant opportunity to capitalize on strong long-term category prospects by investing further in North America penetration and future international expansion.
In recent years, the company has transformed its portfolio into one that has expanded geographically and shifted toward growing businesses, particularly in snacking categories. To achieve this, it has directed resources and investments toward growth categories and markets around the world, made several acquisitions and partnerships in emerging markets, and strengthened its snacks business through acquisitions, divestitures, and the freeing up of resources by exiting from direct-store delivery. The successful execution of these actions has expanded Kellogg's portfolio, resulting in a scaled global snacking business and significant emerging markets presence, complemented by strong and profitable breakfast and plant-based foods businesses. The outcome of these strategic actions has been improved growth in recent years, with momentum sustained into 2022.
After several years of transformation and improving results, the company believes it is the right time to separate these businesses so they may pursue their particular strategic priorities.
As independent companies, all three businesses will be better positioned to:
- Focus on their distinct strategic priorities, with financial targets that best fit their own markets and opportunities
- Execute with increased agility and operational flexibility, enabling more focused allocation of capital and resources in a manner consistent with those strategic priorities
- Realize improved outlooks for profitable growth
- Shape distinctive corporate cultures, rooted in Kellogg Company's strong values, and rewarding career paths for employees of each company
Global Snacking Co.
Global Snacking Co. had estimated 2021 net sales of $11.4 billion* and estimated EBITDA of approximately $2.0 billion* on an adjusted basis, based on preliminary allocation assumptions.
Nearly 60% of its net sales come from global snacks, participating in growing categories and led by iconic, world-class brands including Pringles, Cheez-It, Pop-Tarts, Kellogg's Rice Krispies Treats, Nutri-Grain, and RXBAR, among others.
Less than a quarter of its net sales come from cereal in international markets, featuring world-class brands such as Kellogg's, Frosties / Zucaritas, Special K, Tresor / Krave, Coco-Pops, and Crunchy Nut, among others. By remaining with Global Snacking Co., this international cereal business provides scale, continuity, and growth for the company's Europe, Latin America, and AMEA Regions.
About 10% of its net sales come from noodles in Africa, a rapidly expanding business.
The remainder, less than 10% of its net sales, comes from frozen breakfast and the world-class Eggo brand.
Geographically, North America will represent just under half of net sales, emerging markets about 30% of net sales, and developed international markets more than 20% of net sales.
This business is expected to be a higher-growth company than today's Kellogg Company, featuring a more growth-oriented portfolio and aided by more focused resources and attention to brand building, innovation, and international expansion of world-class brands, and to building scale in emerging markets.
This business is expected to expand profit margins through operating leverage, revenue growth management, productivity, and increasing emerging-markets scale.
North America Cereal Co.
The company plans to separate North America Cereal Co. as an independent business through a tax-free spin-off. North America Cereal Co. is a leader in cereal in the US, Canada, and Caribbean, with beloved brands, a heritage of innovation, and more than a century of operational success. As a standalone company, North America Cereal Co. will have greater strategic focus and operational flexibility, and will direct capital and resources toward unlocking growth, regaining category share, and restoring and expanding profit margins.
The proposed management team for North America Cereal Co. will be announced at a later date.
North America Cereal Co. had estimated 2021 net sales of $2.4 billion* and estimated EBITDA of approximately $250 million* on an adjusted-basis, based on preliminary allocation assumptions.
The business is focused on ready-to-eat cereal in the US, Canada, and Caribbean.
North America Cereal Co.'s portfolio is comprised of iconic, world-class brands such as Kellogg's, Frosted Flakes, Froot Loops, Mini-Wheats, Special K, Raisin Bran, Rice Krispies, Corn Flakes, Kashi and Bear Naked.
Near term, North America Cereal Co. will be focused on the restoration of inventory, profit margins, and share position following 2021 supply disruptions.
Longer term, it will focus resources and strengthen the business through enhancing its portfolio, operating capabilities, and productivity.
This business is expected to generate stable net sales over time, with improving profit margins that will drive profit growth, higher cash flow, and increased return on invested capital.
Plant Co.
The company intends to separate Plant Co. as an independent business through a tax-free spin-off, while also exploring other strategic alternatives, including a possible sale.
Anchored by the leading MorningStar Farms brand, Plant Co. will be a profitable, pure-play, plant-based foods company. This business offers a full portfolio of plant-based offerings across multiple product segments and eating occasions. Kellogg has grown MorningStar Farms steadily since its acquisition over 20 years ago, and the brand now has the highest share and household penetration in the frozen vegetarian/vegan category.
The proposed management team for Plant Co. will be announced at a later date.
Plant Co. had estimated 2021 net sales of $340 million and estimated EBITDA of approximately $50 million* on an adjusted-basis, based on preliminary allocation assumptions.
The business is currently focused on the US, Canada, and Caribbean.
As an independent business, Plant Co. will have the opportunity to build on its strong base of growth and profitability, focusing its resources and investments towards capitalizing on strong category prospects, by building awareness and penetration in North America, and expanding internationally in the future.
The business is expected to accelerate net sales growth over time, from previously disclosed portfolio-segment assumptions.
* All net sales and adjusted-basis EBITDA figures are based on the Company's 2021 unaudited results derived from internal management reporting, further adjusted for splits by brands and markets, as well as preliminary cost and expense allocations, including corporate expenses; these figures will be refined prior to the transactions. Please refer to the reconciliations of adjusted-basis EBITDA, a non-GAAP financial measure, to reported operating profit in this press release.
